WASHINGTON -- It looks as if the economy is inhaling too much after all.

Bond market analysts say they expect the Federal Reserve will have to take on the role of spoilsport and raise short-term rates to restrain an economy that is not slowing down enough to quell inflation fears.

Fed officials on Friday signaled that they were not changing policy when they added reserves to the banking system. But analysts said the July employment report issued by the government will force the central bank to raise the federal funds rate soon, perhaps to 4.75% from the current 4.25%.

The Labor Department said nonfarm payroll jobs increased 259,000 last month following a revised gain of 356,000 in June. The July figures were stronger than expected and marked a continuing surge in employment since the beginning of the year.

Analysts paid scant attention to a separate household survey, which is often more erratic from one month to the next, that said the civilian jobless rate in July edged up to 6.1% after holding steady at 6% for two months.

"We have a fairly strong rate of growth in the economy, and it looks like it's going to continue in the second half of the year," said David Jones, chief economist for Aubrey G. Lanston & Co. "The bottom line is that the Fed is going to have to move from a position of neutrality -- in which it is neither stimulating nor depressing growth, at least by its own contention -- to restraint."

Jones said he believes gross domestic product will rise between 3% and 4% during the second half of the year, well above the 2.5% pace that many analysts say the economy can sustain without igniting inflation.

He predicted that members of the Federal Open Market Committee will raise short-term rates half a percentage point when they meet Aug. 16 and by another half a point after the elections in November.

"It's appropriate for the Fed to move to a more restrictive policy, and do so promptly," said Eugene Sherman, research director of M.A. Schapiro & Co. Sherman said he did not rule out a move by the Fed as early as today, which would help the fixed-income market because it would clarify things ahead of the Treasury's quarterly auction of $40 billion of notes and bonds this week.

Some analysts do not believe the Fed will have to raise rates much more because the economy already shows signs of slowing in housing and other areas. Some say auto sales, for example, are softening not only because of a shortage of popular models but also because of waning consumer demand.

And there is still a question about how much businesses will add to inventories in coming months, boosting production.

"I don't think the economy is gaining momentum," said Ray Stone, managing director of Stone & McCarthy Research Associates. Still, he added, the economy does not appear to be slipping into the lower glide path predicted by Fed officials, making it likely that they will "take out some insurance" by raising shortterm rates by 25 basis points to 4.5O%

Economic statistics have been erratic lately, taking the bond market up and down in the process. The market rallied after the Commerce Department said most of the 3.7% gain in GDP in the second quarter came on inventory building. Sales of new homes hit a two-year low in June.

But the July employment figures seemed to confirm the view that the economy remains strong. Nonfarm payroll gains have averaged 280,000 a month so far this year, which translates into an annual gain of 3.4 million if it is sustained, Sherman said. That would be up considerably from last year's total increase of 2 million.

Moreover, Commerce Department officials noted that the July job gains were dampened by special factors, including a strike at Caterpillar Inc., and summer plant closings at auto assembly plants. Even so, manufacturing jobs increased slightly to mark the 10th straight monthly rise.

At the White House, President Clinton and his top aides held a Rose Garden press event to hail the first anniversary of the deficit reduction bill enacted by Congress.

After a downpour forced guests and the press to move inside the Old Executive Office Building, Clinton stood before a chart marking the creation of 4.1 million jobs since he took office. In his campaign, Clinton pledged to create 8 million jobs during his term. "We're six months ahead of schedule," he said.

Vice President Al Gore recalled all the "doomsayers" who had warned that the president's programs would stifle the economy with higher taxes and end up raising the deficit. Instead, he said, the economic indicators have all turned up, and the deficit has fallen.

Clinton's aides have openly complained that the president is not getting enough credit for the improving economy, and the White House press office distributed statistics to reporters showing gains in employment, business investment, and other sectors.

Administration officials had no comment on the Fed or a possible increase in interest rates. However, they have generally attributed the recent run-up in rates to an improving economy rather than inflation jitters and stressed that they expect the expansion to continue next year.

The official economic forecast issued by the administration in July builds in a small rise in short-term rates in apparent anticipation of some further tightening by the Fed.

The next meeting of the FOMC on Aug. 16 will include vice chairman Alan Blinder, President Clinton's first nominee to'the Fed. It may also include his other pick for the Fed, Janet Yellen, whose confirmation was approved Friday by the Senate Banking Committee.

A final confirmation vote by the Senate could come as early as this week, a committee spokesman said.

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